Rental Yields Increase With Airbnb

Managing Director of Living Space Ikhram Merican is also a popular blogger turned prop-preneur and an award-winning property expert. His journey into the property industry started after he first sold his shares from a telecommunications engineering company, giving him the seed money needed for his property down payment.

During that period in the year 2009, Ikhram saw an advertisement for foreign exchange (Forex) training which teaches participants ways to make quick money. Ikhram says, “I signed up immediately at the first preview. It costs me RM7,000 for the course fees.”

Then, at the second preview, he met an online savvy internet marketer. They both got along and he learnt google techniques and search engine optimisation (SEO) ways from the marketer which enabled him to start his blog for business purposes. Thereafter, Ikhram started blogging passionately on property investment.

A CONTINUING JOURNEY

Ikhram’s journey into blogging about the property industry started in the year 2012. After the first four to five months, the blog picked up in terms of number of hits in tandem with increasing searches for property in areas spanning Damansara Perdana, Mutiara Damansara and so on. Ikhram’s article was also picked up by one of the leading business publications which ran a centrespread story for him, after which people started to call to enquire more about properties in these areas.

He then decided to become a real estate negotiator and joined Starcity Property Sdn Bhd. Ikhram was a high-flyer, being the top negotiator of the company with record sales and the highest value of transactions. Most of his transactions then dealt with sub-sales for condominium units and landed properties.

In the year 2014, Ikhram stopped property negotiations altogether due to softening market conditions.

“The property market is cyclical and had softened then. I was looking for ways to stabilise my income and went to London to attend a property convention which led to my first encounter with Airbnb,” he shares.

Airbnb is an online marketplace that also offers hospitality service among others. It enables people to lease or rent short-term lodging that cover vacation rentals, apartment rentals, homestays to even encompass the rental of hostel beds or hotel rooms. Besides Airbnb, a few other establishments are also using the same online booking concept. These include Expedia, Agoda, Trip Advisor, Home Away, Malaysia Homestay and more.

VACATION TRAVEL IDEAS

The idea of bringing Airbnb to Malaysia struck him as a brilliant concept. When two of his clients wanted to sell off their Regalia Suites and Residences units in Kuala Lumpur, he offered instead to take over and rent them out instead using Airbnb as a platform. With both the clients agreeing to this, they started this venture by listing the units and hosting agents to engage on this Airbnb platform.

“I have almost 40 units of properties listed and running on Airbnb now. I’ve discovered that the best way is to lease out my units as the returns are between 30% and 40% profitable,” opines Ikhram.

The furnishings for the units are arranged by the owners themselves, and if this is not agreed upon, then Ikhram will not put up the units for rental.

To date, Ikhram counts his 18 units at Regalia Suites and Residences on Jalan Sultan Ismail in KL as engaging the Airbnb platform. In all, at the development itself, there are about 200 to 300 units operating on a vacation rental host platform. While the maintenance services may have been affected due to the popularity of these huge numbers and raises some security concerns, he says that nevertheless, the units remain very popular due to the area being a popular vacation spot for tourists and residents alike.

OVERCOMING CHALLENGES

Ikhram shares that one of the major problems faced by Malaysians is price competition. “About four years ago, it was possible to get RM7,000 to RM8,000 price rentals for a studio suite but now, it’s barely RM2,000 resulting in a steep drop in pricing,” says Ikhram.

In addition to this, there are also challenges coming from the residents and joint management bodies of various apartments.

Some of the challenges stem from bad hosts, owners or managers who spoil the market by not screening the occupants beforehand. This may lead to parties and crowds to disturb the harmony of the property with loud music into the night.

Notwithstanding this problem, he says that about 90% of the residents still abide by Airbnb house rules.

Commenting on the bad experience he encountered on the second month he engaged the Airbnb platform, he recalls that a renter from Klang misused the unit by bringing in alcohol and placed a barbeque pit in the centre of the living room of his premium unit to his dismay.

Having said that, he says the good outweigh the bad and Airbnb to him is reliable even though some repeat clients can directly contact the hosts for their future stays. This is due to the value added services Airbnb provides for its users.

For instance, if there are disagreements or queries, Airbnb can step in and resolve any sort of complication arising from the use of the property. Furthermore, offline vacation booking satisfaction is not high as compared to booking via Airbnb as the latter can step in to assist should any problem arise.

In terms of tenant management, the top factors here include occupancy and pricing factors. High occupancy he says oftentimes coincides with low pricing periods.

“This has been captured via research based on different rental prices. During holiday seasons, weekends or events especially, the prices of the units can be maximised,” he says.

BUSINESS OUTLOOK

Ikhram runs his Airbnb management business with a small team of ten comprising maintenance helpers, housekeeping personnel, guest relation and registration officers. He believes that in the future, this business would be easily accessed by about 1 billion internet users globally. He also foresees that property developers would begin to cater for products which are more Airbnb-friendly too.

Ikhram shares that an Airbnb study conducted two years ago in Italy, showed that it successfully contributed EU3.4 billion (RM16.66 billion) amounting to approximately 0.22% of its gross domestic product (GDP) while supporting around 90,000 job opportunities.

Malaysia, which now ranks at number 11 for tourist arrivals he believes, stands to benefit from Airbnb’s arrival here which has been supporting the tourism industry on a huge scale.

“Property investors and buyers should know that Airbnb is a concept which could increase the investment value of property with good returns,” says Ikhram.